Steps forward for the euro

European economic governance is finally taking shape, despite political delays in addressing the relentless crisis, which in the last two years resulted in a fragile financial sector, slow production, trading and investments and growing unemployment. On October 28 and 29, the European Council endorsed the outline plan to prevent and address market instability, even if the heads of state and government of the 27 EU Members will have eight more months, until 2011, to implement their strategy. Another shadow is lingering over the continental scene: the Lisbon Treaty “partial review”, that calls for a National ratification phase.The Euro and stronger economies. “In order to address the challenges which emerged from the recent financial crisis, a fundamental shift in European economic governance is needed.” To that end, the European Council endorsed “the Task Force Report on Economic Governance”, whose implementation will constitute “a major step forward in strengthening the economic pillar of the European Monetary Union”. The report also set out “greater fiscal discipline”, and “broadening economic surveillance and deeper coordination”. The summit’s “Conclusions” – a six-page final document that sums the decisions taken in Brussels last week – must be integrated with statements of the EU Institutions and Member States leaders. Herman van Rompuy, Belgian President of the European Council, stated: “We have taken important decisions to strengthen the euro-zone”. The main three topics were: setting up a new macro-economic surveillance framework to detect imbalances and risks (which includes the Stability and Growth Pact, with debated institutional issues and consequent request of Lisbon Treaty review); EU 2011 budget and its multiyear structure; foreign policy and upcoming international events (G20, UN Conference on Climate and various bilateral meetings, such as the one with the US and Russia). Ratification risk. “The most relevant result has been strengthening” of the single currency and European economy, Van Rompuy pointed out in his concluding remarks. The possibility of creating a “permanent fund” (immediately renamed European Monetary Fund”) to be used in cases of instability in financial and National public accounts (Greek economic crisis left a deep scar). Furthermore, an agreement on sanctions against Countries that aren’t able to meet “virtuous” ratios between deficit and GDP and debt and GDP, as envisaged by the Stability Pact. The European press immediately concentrated on the summit’s political issue: with the possible, and perhaps necessary, Treaty review that would have to be ratified by each country within 2013. One may wonder if this review (strongly backed by German Chancellor Angela Merkel and French President Nicolas Sarkozy) can be counterproductive for Europe considering all the problems it created in the EU between 2008 and 2009. Will the Irish vote again in favour of the Treaty? And what about other countries where the approval was more difficult? What would be the public opinion’s reaction to the EU in general? What about the risks of fuelling Euroscepticism and populism in the old Continent? Fast Track. The European Council governance strategy calls for a “fast track approach”. “The objective is for the Council to reach an agreement by summer 2011 on the Commission’s legislative proposals,” that will be presented at the December Summit. Josè Manuel Barroso, Portuguese Commission President, commenting the summit said: “Clear measures have been taken to strengthen the stability of the euro area in case of external threats. “The sanctions against those who do not comply to the Stability Pact have not been stated.” On governance he added. “Important measures must be taken” internally; “keeping in mind the global context because the long-term growth of our economy depends also on the health of the global environment”. That is why I am glad that the President of the European Council and I, representing the European Union have received a strong mandate to promote global governance reforms with our G20 partners”.